Electronic Arts bids for Take-Two Interactive

You knew this had to happen. Electronic Arts can’t abide being smaller than Activision Blizzard. So now it is making a bid for Take-Two Interactive, the owner of Rockstar Games. Frankly, I don’t think the Take-Two folks should sell. Having seen Grand Theft Auto IV in a preview, I think that EA should pay a princely sum for Take-Two, not a mere $2 billion or so. The game looks outstanding.

Here’s some analysis from analyst Michael Pachter of Wedbush Morgan:

On Sunday, Electronic Arts announced that it has proposed to acquire Take-Two for $26 per share.Â The all-cash merger values TTWO at approximately $2.0 billion and represents a premium of 50% from last Friday’s closing price.
Take-Two rejected EA’s offer, and to publicly release its offer. EA intends to keep its proposal open for the present to give Take-Two’s shareholders and Board further time to consider it.
In the proposal, EA stated that it believes this deal represents a compelling opportunity for Take-Two shareholders. EA believes that its stable franchises, financial resources, management team, and global publishing capabilities will positively impact the post-launch sales of GTA IV and for other new Take-Two titles. EA believes this deal would be accretive to earnings at least by its FY2010 if it is able to close the deal by the year-end holidays.
Take-Two offered its own response which stated that it believes EA’s current offer is inadequate and has offered to initiate discussions with EA on April 30th, 2008 (after the launch of GTA IV).
We were shocked and awed by the offer, and our Sell recommendation was wrong. We believe EA fully intends to complete this acquisition, and believe that Take-Two’s investors will decide that a sale is the best option for them.
We expect Take-Two shares to trade based on the offer price for the foreseeable future. We are raising our rating to HOLD from SELL, and establishing a price target of $26.